GHO spent most of 2024 trading below its $1 peg, which made it easy to dismiss. The mechanism was sound - borrow GHO against collateral on Aave V3, pay a governance-set interest rate, no external oracle dependency for minting - but the peg slippage, sometimes 2–3 cents, undercut the pitch. That’s now largely resolved, and the way it was fixed is more interesting than the fix itself.
What Actually Stabilised It
Aave governance introduced GHO Stability Module (GSM) contracts that allow direct swaps between GHO and approved stablecoins at near-par rates, effectively creating a redemption floor. Combined with GHO Facilitators - whitelisted entities permitted to mint GHO up to a defined cap - the system now has two levers: mint supply control and on-chain arbitrage absorption. The peg has held within a tight band through much of 2025.
The interest rate structure matters here too. Staking AAVE tokens into the Safety Module earns a discount on GHO borrowing costs. That links protocol governance participation directly to stablecoin demand in a way most CDP models don’t attempt.
The Treasury Angle
What’s less discussed is how a handful of DeFi protocols have started holding GHO in their own treasuries or using it for internal payroll-style distributions to contributors. The appeal is straightforward: GHO can be minted by a protocol that already holds Aave-compatible collateral, meaning a DAO doesn’t need to sell productive assets to fund operations - it borrows against them at a known, governable rate.
This isn’t novel as a concept. MakerDAO built DAI partly on this logic years ago. But GHO operates within an existing lending market with deep collateral options and established risk parameters, rather than requiring a separate system. The infrastructure is already there.
The Risk That Doesn’t Get Priced In
Aave’s Safety Module is the backstop if bad debt accumulates - and GHO’s solvency is downstream of Aave’s overall collateral health. A sharp, correlated drawdown across Aave’s supported assets could stress both the lending protocol and the stablecoin simultaneously. That’s a concentration risk that’s easy to wave off when markets are calm.
Whether that dual exposure becomes a real problem probably depends on how aggressively GHO scales its Facilitator caps. Governance has been cautious so far, but the pressure to grow mint capacity tends to build as usage grows.